TY - JOUR
T1 - Currency substitution under finance constraints
AU - Boyer, Russell S.
AU - Kingston, Geoffrey H.
PY - 1987
Y1 - 1987
N2 - The perfect-foresight continuous-time couterpart of Lucas and stokey's cash-in-advance model is generalized to the case of two currencies. The money demand function for eac currency has as arguments the endowments of goods associated with each denomination. Various monetary shocks are investigated including permanent and temporary changes in levels and growth rates. It is shown that substitution can be an important factor in explaining: the possible negative transmission of inflation, the amount of volatility of exchange rates, and the degree tp which exchange rate movements approximate a random walk.
AB - The perfect-foresight continuous-time couterpart of Lucas and stokey's cash-in-advance model is generalized to the case of two currencies. The money demand function for eac currency has as arguments the endowments of goods associated with each denomination. Various monetary shocks are investigated including permanent and temporary changes in levels and growth rates. It is shown that substitution can be an important factor in explaining: the possible negative transmission of inflation, the amount of volatility of exchange rates, and the degree tp which exchange rate movements approximate a random walk.
UR - http://www.scopus.com/inward/record.url?scp=38249033201&partnerID=8YFLogxK
U2 - 10.1016/0261-5606(87)90001-5
DO - 10.1016/0261-5606(87)90001-5
M3 - Article
AN - SCOPUS:38249033201
SN - 0261-5606
VL - 6
SP - 235
EP - 250
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
IS - 3
ER -